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REIT Share Value Calculation Using Net Asset Value, P/FFO, P/AFFO, and Discounted Cash Flow Approaches

 Calculating the Value of a REIT Share An example is better suited here to help candidates understand the concept. Example: Value of a REIT Share Tysons Limited, a real estate asset management company, is keen on diversifying its portfolio…

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REIT Valuation Using Funds From Operations (FFO) and Adjusted Funds from Operations (AFFO).

 Funds from Operation (FFO) FFO amends reported earnings and is a popular measure of the ongoing operating income of a REIT or REOC. It is calculated as follows: $$\small{\begin{array}{l|r} \hline\text{Accounting Net Earnings} & XX \\ \hline\text{Add:Depreciation expense} & XX…

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Net Value Per Share (NAVPS) in REIT Valuation

 NAVPS refers to the (per-share) amount by which assets exceed liabilities. The amount is computed using current market values, as opposed to accounting book values, divided by the number of shares outstanding. NAVPS is generally considered the most appropriate…

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Types of REITS

 The primary type of REITs, the equity REITs, are keenly managed enterprises that seek to maximize returns from their property portfolios by applying management skills in operations and finance. Retail or Shopping Center REITs This class comprises shopping malls…

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Basic Forms of Real Estate Investments

 Basic Forms of Real Estate Investments Real estate can be categorized either as non-residential (commercial) or residential property. It can also be classified as for rent or owner-occupied. Commercial real estate refers to four large rental types: shopping centers,…

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Valuation of Real Estate Properties

 Commercial property valuations are crucial since they determine the value of any particular real estate property. Income Valuation Approach This scenario compares the price at which an investor acquires property with the anticipated return rate versus the investment’s inherent…

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Financial Ratios Used to Analyze Real Estate Investments

 Debt financiers often prefer the debt service coverage ratio (DSCR) and the loan to value (LTV) when arriving at the maximum loan on a definite property. $$ \text{DSCR} = \frac {\text{Year one NOI}}{\text{Debt service}} $$ Where: $$ \text{Debt service}…

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Role of Economic Value Determinants in Private Real Estate Debt Investments

 Economic Drivers The following economic factors affect the demand for major property types: GDP: This is, by far, the most important economic factor as it affects all property types. As the GDP grows, the demand for real estate investment…

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Real Estate Investments Indexes

 Private equity real estate investment indexes allow the investor to analyze property investment performance using either appraisal-based or transaction-based index methods. To determine the best index method to employ, an investor needs to clearly understand the modalities that guided…

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Due Diligence in Real Estate Investment

 The due diligence process involves the corroboration of proofs by commercial property investors. It may affect the overall worth of a property that the valuer may have overlooked before a property transaction is finalized. The due diligence process can…

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